PETROL d.d., Ljubljana
The Supervisory Board Discussed the Report on the Operations of the Petrol Group and Petrol d.d., Ljubljana in the First Three Months of 2020
The information contained in this announcement will remain posted on the website of Petrol d.d., Ljubljana (www.petrol.si) at least 5 years from the date it is published.
Ljubljana, 21 May 2020 – At its 42nd meeting held today, the Supervisory Board of Petrol d.d., Ljubljana was briefed on the Report on the operations of the Petrol Group and Petrol d.d., Ljubljana in the first three months of 2020.
In January and February 2020, the operations in all of the Petrol Group's markets continued without disruption and according to plan. In March 2020, however, the business environment deteriorated considerably as the pandemic began. Petrol Group companies have been closely monitoring the situation since the outbreak of the epidemic and have implemented the necessary measures to contain the spread of the virus and ensure uninterrupted energy-product supply. When developing measures and putting them into practice, the Petrol Group complies fully, in all of its markets, with the instructions issued by the authorities. Its primary concern are measures aimed at protecting the health of Petrol's customers and employees. There is no disruption in the energy-product supply, and all points of sale are operational.
In the first three months of 2020, the Petrol Group's adjusted gross profit stood at EUR 105.3 million, which was on a par with the same period of 2019. EBITDA totalled EUR 46.5 million or 26 percent more than in the first three months of 2019, owing to a positive effect of EUR 8.6 million arising from the value of the derivatives used to balance out petroleum-product price quotes. This was the result of the fact that at the beginning of the year diesel price quotes for the coming months were twice as high as at the end of March 2020. Excluding this effect would mean that EBITDA for the period from January to March 2020 would have totalled EUR 37.9 million, up 2 percent year-on-year. The Petrol Group generated 47 percent of its EBITDA through petroleum product sales, 21 percent through merchandise sales and related services, 18 percent through energy and environmental solutions, 12 percent through the sale of other energy products (natural gas, electricity, LPG), and 2 percent through renewable electricity production. The Petrol Group's net profit stood at EUR 21.8 million, a year-on-year increase of 20 percent.
In the first three months of 2020, the Petrol Group sold 742.9 thousand tons of petroleum products, down 18 percent year-on-year (mostly due to lower sales to the Agency of the Republic of Slovenia for Commodity Reserves). The sales of liquefied petroleum gas totalled 42.1 thousand tons, which was 5 percent less than in the same period of the previous year. Electricity sales stood at 5.7 TWh in the first three months of 2020 and natural gas sales at 6.4 TWh. During this period, EUR 127.0 million was generated in revenue from the sale of merchandise, a decrease of 3 percent compared to the same period of the previous year. At the end of March 2020, the Petrol Group operated 509 service stations, of which 318 in Slovenia, 109 in Croatia, 42 in Bosnia and Herzegovina, 15 in Serbia, 15 in Montenegro and 10 in Kosovo.
The Petrol Group responded to the crisis caused by the epidemic in a comprehensive manner. Initially, activities were focused on ensuring the continuity of operations in the changed circumstances and on identifying and managing risks. Further activities, however, have a long-term focus so that the Petrol Group can operate without interruption in a very different business environment.
Due to the natural disaster (the pandemic) and the resulting economic crisis, which could not have been predicted, the 2020 business plan cannot be achieved. Measures to contain the epidemic taken by countries in which the Petrol Group operates have caused a significant decline in economic activity and restricted movement, which has had a very detrimental impact on the Petrol Group’s sales. Because it is uncertain how the situation will develop, the Petrol Group prepared different scenarios for operations in 2020.
The scenarios consider various cases ranging from the possibility that restrictions on movement within countries are lifted in May, but certain restrictions on transit traffic and tourism still remain which have a major impact especially on operations in the summer months, to the possibility that the last quarter of 2020 will again see major restrictions on movement and further deterioration in business conditions as a result of that. We thus expect that the volume of petroleum products sold in 2020 could reach between 83 and 86 percent of the 2019 figure (without the sales to the Agency of the Republic of Slovenia for Commodity Reserves). Given the estimated decrease in sales in the coming months, the streamlining of costs and the adjusted volume of investments, the Petrol Group's EBITDA for 2020 could amount to between 73 and 79 percent of the 2019 EBITDA, or to between 77 and 84 percent of the 2019 EBITDA if one-off events are not taken into account (the 2019 EBITDA does not include the reversal of provisions for lawsuits and penalties relating to procedures ended in 2019, the cumulative effect of which totals EUR 11.1 million).
In Slovenia, which is the Petrol Group's main market, the prices of petroleum products remain government-regulated at most service stations (other than motorway and expressway service stations). The Petrol Group is thus limited in responding to the difficult business conditions through an adequate pricing policy. In addition, motor fuel margins in Bosnia and Herzegovina have been limited since 9 April 2020 to EUR 0.128 per litre (retail margin) and EUR 0.031 per litre (wholesale margin).
Cost optimisation and streamlining of operations have the highest priority as far as the Petrol Group’s tasks in the rest of 2020 are concerned. Important activities in this area include analysing best practices in the Petrol Group’s sector, identifying possible savings and streamlining business processes.
The Petrol Group will continue to closely monitor the behaviour of its customers and will adapt its range to reflect market conditions. Uninterrupted energy-product supply will be ensured in all markets. The measures aim to ensure that the Petrol Group emerges from the crisis stronger than it was before and continues to provide an adequate return to shareholders.
The Supervisory Board of Petrol d.d., Ljubljana is of the opinion that the Management Board of Petrol d.d., Ljubljana responded appropriately to the pandemic and has control of the situation in the given circumstances.
At today's meeting, the Management Board and the Supervisory Board also adopted changes and amendments to the Company's 2020 financial calendar that were necessary because of the cancellation of the General Meeting in April. The General Meeting is expected to be reconvened at a meeting in June and is foreseen to take place on 23 July 2020. The consolidated version of the financial calendar will be made public alongside this announcement.
President of the Supervisory Board
Nada Drobne Popović
President of the Management Board